%0 Generic
%A Rieger, Jörg
%D 2014
%F heidok:16804
%K Transaction Tax, Financial Regulation, Heterogeneous Beliefs
%R 10.11588/heidok.00016804
%T Financial Transaction Tax and Financial Market Stability with Diverse Beliefs
%U https://archiv.ub.uni-heidelberg.de/volltextserver/16804/
%V 0563
%X This papers studies the impact of a financial transactions tax on the trading volume and asset price volatility in a model with heterogeneous beliefs. To model heterogeneous beliefs we follow Kurz (1994, 1997) and restrict the class of beliefs to the subset of rational beliefs. We study a tax on bond and asset purchases. The simulated model shows that the introduction of a transaction tax results in a lower trading volume and therefore in less liquid financial markets. Because of the decreased liquidity the volatility of the stock market increases. We also study the welfare effects of a financial transaction tax and the simulation results also show that there is only a small change in welfare.